Will Delta pilots destroy the airline?

[General Lee]

The financial condition of this patient is NOT great. It has been going down hill since 9-11. We have seen this occuring, and we have offered some help with many side letters and some pay cut offers too. The main deal here is that for us to be competitive, we need a lot of things to change, like lease rates on our aircraft. United is currently paying 737 lease rates on their 747-400s. That, along with their huge employee pay cuts, makes them more competitive and able to charge lower fares. Had we given the company $1 billion a year from the pilots right off the bat, other players in this game, like the lenders, vendors, and leasors, might not have played along---thinking "Hey, the pilots have given a large amount--so we don't have to...." And then, 1 year later, we would have been back in the same situation if something else went wrong--like invading another Middle East country or more terrorism. We recognized that we needed help from everyone, and Grinstein agreed. It is my feeling that we already have most the negotiating done with the company, and that we are waiting for the creditors etc. to also agree to some. We have a lot to lose, and we all know it. I haven't flown with one Captain who has stated "full pay to the last day....." Nope.


Also, isn't it strange that the other non-union employees, who don't have a contract etc, won't get their 10% pay cut until Jan 1st, 2005? Why wouldn't that go into effect sooner, since we obviously need the money and they have no contracts to negotiate?


Bye Bye--General Lee

PS--Rumple, You really need to watch out when creating a title----that one is inflamatory to say the least. If you don't know what you are talking about, then don't create a title like that. I bet you can't change it, right?

 

[FDJ2]

"In our opinion, Delta is not
adequately addressing its debt
burden, an opinion we believe the
pilots will ultimately come to share."
(JP Morgan analyst Jamie Baker)


Delta's most urgent need is to address their debt problems. Pilot or other labor concessions cannot address immediate liquidity issues. Delta is in the position it is in financially because of the decissions made by Delta management. Delta pilots offered $2M/day in concessions three months ago, and the company scoffed at it. Delta could have unilaterally imposed $1B in take backs from non contract employees a year ago, yet they won't impose these take backs until 2005, Delta foolishly squandered $2.3B in stock buy backs instead of paying down its growing debt. In Leo Mullin's 6 year tenure at Delta he spent more money on establishing a bankruptcy proof pension fund for 32 managers then he ever spent contributing to the Delta pilot pension fund. Delta management sold it's fuel hedge contracts for $83M in Febuary in order to help make a voluntary contribution to its non contract employee pension funds, a decision that is estimated to cost DAL over $600M this year alone.

 

[On Your Six]

"In our opinion, Delta is not
adequately addressing its debt
burden, an opinion we believe the
pilots will ultimately come to share."
(JP Morgan analyst Jamie Baker)


Delta's most urgent need is to address their debt problems. Pilot or other labor concessions cannot address immediate liquidity issues. Delta is in the position it is in financially because of the decissions made by Delta management. Delta pilots offered $2M/day in concessions three months ago, and the company scoffed at it. Delta could have unilaterally imposed $1B in take backs from non contract employees a year ago, yet they won't impose these take backs until 2005, Delta foolishly squandered $2.3B in stock buy backs instead of paying down its growing debt. In Leo Mullin's 6 year tenure at Delta he spent more money on establishing a bankruptcy proof pension fund for 32 managers then he ever spent contributing to the Delta pilot pension fund. Delta management sold it's fuel hedge contracts for $83M in Febuary in order to help make a voluntary contribution to its non contract employee pension funds, a decision that is estimated to cost DAL over $600M this year alone.

And yet there is really very little accountability from management. Sure, Grinstein fires Leo's cronies and then he says, "Well, now you have nobody to blame. Time to fork over the concessions." Leo is laughing his way to the bank while he sips his herbal tea on the porch of his huge Martha's Vineyard mansion....

 

[enigma]

Rumpletumbler, (what the heck is a rumpletumbler anyway?), Here's a repost of an article I found last week. Also, you might want to think twice before giving your posts inflamatory headlines. I actually skipped this tread for a few days because of the heading.

enigma

Note: I added the the colored fonts as highlites.

http://www.detnews.com/2004/busines.../b03-303177.htm

Debt mars Delta's recovery
Huge interest payments dwarf savings airline seeks from pilot wage concessions.

By Harry R. Weber / Associated Press


ATLANTA - While much of the public focus surrounding Delta Air Lines Inc.'s turnaround efforts has been on the need for pilot concessions, some analysts believe the carrier's massive debt is a bigger challenge and the one more difficult to resolve outside of bankruptcy.

The nation's third-largest carrier paid $757 million in interest on its debt last year, a figure that has increased more than 50 percent since 2001, regulatory filings show. At that rate, the $1 billion in annual savings Delta hopes to achieve by 2006 from pilot wage and other concessions would be eclipsed by the company's yearly interest payments.

The airline's effort to restructure its debt could soon become clearer. Today is the deadline for a recent debt exchange offer. And next Wednesday, Delta reports its third-quarter earnings, which are expected to provide updates on its debt and available cash.

"In my opinion, they're going to get the concessions; I've got a couple of steak dinners bet on that," said Ray Neidl, an airline analyst with Calyon Securities Inc. in New York. "I think the more difficult thing is going to be restructuring the debt."

The Atlanta-based airline considers its total debt to be $20.6 billion, which includes $8 billion in noncancelable lease obligations on aircraft and other equipment. Interest on its debt was $499 million in 2001 and $665 million in 2002. Through the first six months of this year, Delta had accrued $391 million in interest on its debt, records show.

Delta's scheduled debt maturities on the principal it owes are $230 million for the six months ending Dec. 31, and $1.2 billion for all of 2005, records show. Meanwhile, as of June 30, Delta had only $2 billion in unrestricted free cash, which it has been burning at a rate of $4 million a day.

Its earnings release next week will show how much cash it had as of Sept. 30, which could help determine if it needs to file for Chapter 11.

"If the cash is down to $1.5 billion, I think time has run out," Neidl said.

Delta could stem the increase in its debt and pay off existing debt if it can cut other expenses, like pilot costs, said Joel Denney, an analyst for Piper Jaffray & Co. in Minneapolis.
End


The last paragraph pretty well sums up the general attitude, and frustrates me to no end. The writer spends the whole article, detailing problems which have nothing to do with pilot wages, but ends up with the conclusion that cutting pilot costs is the solution. Dirty barsards.

enigma

 

[rumpletumbler]

Rumpletumbler, (what the heck is a rumpletumbler anyway?), Here's a repost of an article I found last week. Also, you might want to think twice before giving your posts inflamatory headlines. I actually skipped this tread for a few days because of the heading.

I just started it this morning. Anyhow...sorry to all. I was not trying to be inflammatory. Thats how they pose it on the news more or less. I just want to know the real scoop. Thanks for your reply. Rumpletumbler is a name I came up with for sex a while back. Not sure why I used it as a user name.

 

[Clyde]

This is not humor.

Obviously in Atlanta this has been on the news quite a bit and I'm curious to hear from someone in the know. I understand wanting to be paid a fair wage etc. but if you know they will go under if you don't take a pay cut is that like your pay back or what? I'm not slamming Delta pilots and am very ignorant on the whole situation. I'm just curious if the plan is to nuke em if they don't come up with what you want. That sounds stupid to me.

I think it's safe to say that management has destroyed the airline. When you look at Delta, United,and US Airways, they (as well as many others) are in dire financial straits. How many times have the pilots safely delivered their passengers to their destinations? Countless times, and in a very professional manner.

It's our job to make sure the airplane is operated correctly and headed in the right direction. It's management's job to make sure the airline itself is run in a similare manner. If pilots begin to screw up and cause incidents and accidents out on the line, they are replaced. It should be the same for management. They start causing incidents and accidents on the balance sheet, it should be sianora to them.

I don't mean to be venting, but I have yet to see an airline fail due to the actions of John Q. Pilot. (exceptions for labor strife, like a strike). We are doing our part, all of us, to be professional and do exactly what our job descriptions demand us to do. What is not part of our job description however, is to take it in the shorts when the suits upstairs screw up.

So, to answer what was originally asked, I don't think the pilots will cause Delta to fail. The MBA's upstairs have already done that.

 

[capt. megadeth]

Let's all fly for free!

That will save all the airlines! We can all live together in a compound eating Ramen noodles after we all file personal bankruptcy. What do you all think?

 

[Clyde]

Let's all fly for free!

That will save all the airlines! We can all live together in a compound eating Ramen noodles after we all file personal bankruptcy. What do you all think?

Um, what flavor noodles?

 

[Publishers]

OK The pilots have not screwed up the airline......On the other hand, there have been a few things happening that management had to deal with that are not of their own making.

At this point-- who is at fault is not really the point.

The only important point is this -- what do we do to get ourselves out of this mess. This business was not created so you can have a job no matter how well you did it. As to some specific points.

United may be paying less for a 747-200 than a 737.. They took bankruptcy and under that scenario, contracts can be forgotten. That does not mean the lessors wanted to reduce payments, it meant they were forced to. Will your bank reduce the payments on your car because you are going through tough times.

Fuel prices-- well really not controllable past a certain point. Sourthwest hit the hedge lottery and Delta did not. Let's tell the Arabs they need to kick in some funds for Delta -- a good customer-- and see where that leads.

Insurance-- one thing before September 11 and another since. Surely they want to contribute.

Airports -- well they are doing real well since 9/11 having their basic security budgets increase by 100% or in some cases more. They should be a soft touch.

Banks-- well we have $30billion in debt --surely they will line up to forgive that.

Let's see-- that leaves 2 things-- labor cost and ticket revenues.

The only way out is to sell more tickets at higher prices and or reduce one big expense -- payroll. And who is the most expensive part of payroll,,,,,,, ah, ah, Oh yeah, pilots.

Chapter 11 means -- we failed........

 

[michael707767]

United may be paying less for a 747-200 than a 737.. They took bankruptcy and under that scenario, contracts can be forgotten. That does not mean the lessors wanted to reduce payments, it meant they were forced to. Will your bank reduce the payments on your car because you are going through tough times.

No, lessors do not want to reduce payments....anymore than the pilots want to take pay cuts. But, that is the new reality. Our contract was signed during different times, difference economic conditions. Times have changed. The finances of the airlines are totally different. Our contract will have to be adjusted to reflect that, and so should contracts on leases. Bottom line is the same for the pilots and the lessors. We can negotiate a deal now, out of bankruptcy, or we can wait for a deal in bankruptcy, where we will probably get even less.

And to answer your last question above, yes. If you are on the verge of bankruptcy and defaulting on a loan, call your bank. They will probably deal with you.